Tuesday, December 27, 2011

I had an interesting conversation with an acquaintance a couple of weeks ago. This individual is a conservative East Texan. Unfortunately, this individual, like many other individuals (including conservatives), has fallen into the trap of believing everything he sees on the news instead of looking into the facts. It is vitally important for Americans, especially conservatives, to always research the facts about an issue. It is so very easy to be going along as a conservative and then the next thing you know you are spouting liberal ideas because you have been misled by what has been pounded into your brain by the liberal media. My case in point is the conversation I had with this conservative East Texas acquaintance.

Do the Rich Pay a Smaller Percentage of Income in Taxes than the Middle Class? Facts Prove Otherwise

At some point during our conversation we got into a discussion about taxes, profits and corporations. The conversation up to this point had been very non-controversial. We were agreeing about most everything. Then out of nowhere this guy said that corporations and rich people are not paying any taxes and that they should pay their fair share. I asked him what he meant by “fair share”. He said that corporations and rich people have so many loopholes that they end up paying a less percentage of their income than everyone else. He then said that to be fair, everyone should have to pay the same percentage, about 15% to 20% of their total income.

I told him that corporations and rich people would LOVE his idea of everyone paying the same percentage because currently the rich people pay a much higher percentage of their income than everyone else. He did not believe that rich people pay a higher percentage of their income than he does. He even used the example of Warren Buffett getting on the news saying that millionaires pay a lower percentage than their secretaries. I told him that there are some individuals in all income levels who get around the tax rates, but on average the rich pay a higher percentage than everyone else. He did not believe me so I got online and showed him that, according to information from the IRS and the Tax Policy Center, after all the loopholes, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes, payroll taxes and other taxes. Households making between $50,000 and $75,000 will pay an average of 15 percent of their income in federal taxes. Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

Furthermore, a small percentage of rich people actually pay most of the taxes in America. The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent offederal income taxes, according to the Congressional Budget Office.

The bottom line is that, if “fair share” is measured by what percentage of income is paid in taxes then rich people pay their fair share and more.

Billions in Profit is not really Profit when Companies have Billions in Debt and Billions are needed to Invest and Expand

This individual still did not believe me. He kept harping about corporations bringing in billions of dollars in profit and not paying taxes. He specifically used the example of Exxon Mobil (this is what he sees on the news of course). I told him that just because a company makes billions in profit does not mean they are greedy or not paying their fair share. First of all, everyone who works for Exxon Mobil pays individual taxes on the income they make from the company. Second, the amount of profit a company makes is deceptive. Oil Companies might make billions of dollars in profit but they have billions of dollars in debt that they have to pay back. Also, the oil business is not cheap. Some oil platforms are as big as the Empire State Building and cost a bunch of money. The profit people see oil companies making will likely go to pay the company debt or to store up in the bank to pay for massive future expenses like drilling new wells. Drilling new wells creates jobs by the way.

According to Euro Pacific Capital, facts have a pesky habit of mucking up an otherwise well-tailored story. While it's true that US corporations have a record amount of cash on their books, as is widely reported, they are also carrying a record amount of debt, which is hardly reported at all. Since 2005, U.S. corporations have added a half a trillion dollars of cash to their balance sheets. While that sounds like a lot, they have simultaneously added more than three times that ($1.8 trillion) in debt. Given the exposure that the debt creates, carrying large cash reserves should be viewed as an act of fiscal responsibility rather than unnecessary frugality. Sadly, like the rest of our struggling republic, many American companies are on the ropes, perhaps one good punch away from a knockout. With a high percentage of consumers and all levels of government still drowning in debt, it's very fortunate that at least one sector has cash in reserve.

I did find it odd that this individual only mentioned oil company profits. I guess the media does not talk about profits from other companies so this individual I was talking to do not know that other companies make billions of dollars in profit too, like Warren Buffett. Buffett, who was the one who falsely stated that rich people pay a lower tax rate than middle class people, has yet to send in any extra tax money to the IRS even though he complains that he does not pay enough.

Socialism is Invading America like a Frog Killed in Boiling Water

Once the facts were presented about how much the rich actually pay in taxes, and how much debt that companies have compared to the profit they make, this individual was still not satisfied. It was never about making the rich pay their fair percentage I suppose. This individual was not looking for free handouts. He has a job and works hard. He is not some Occupy Wall Street nut job protester. Over time though, he has been told that rich people do not pay enough. He has fully bought in to that idea and he is just not happy with the fact that someone is making millions and he is making $50,000 a year. That is capitalism though. No one is stuck making the salary they currently make. Everyone has the opportunity to step out and work hard and start a company or get more education, which then gives someone the chance to make more money for themselves. Not only is that capitalism, it is also a very important part of keeping the American economy strong. For the chance to make more money, people will work harder and invest more and try to expand their businesses and come up with new innovations. If the incentive of making more money goes away then so does the drive to work hard, to come up with new ideas, and to take risks to expand businesses.

I finally asked this individual if he knew that what he was saying was leaning towards socialism. He got very upset and said that he was not a socialist. He hunts and does not like Obama. I told him that whether or not he thinks he is a socialist, it is socialistic to believe that it is not fair that the rich make so much profit and it is socialistic to think they need to “share the wealth.” In fact, it sounds a lot like when Obama told Joe the plumber that rich people should have their profits taken and shared with everyone else to spread the wealth. The conversation pretty much ended there.

It is like the old saying, if you put a frog in boiling water then the frog will jump out, but if you put a frog in regular temperature water and slowly turn up the heat then the frog will stay in and boil to death. This individual that I had this conversation with would never go along with socialism if you told him it was socialism. Over time though, even conservatives are starting to believe the lies that they are constantly being bombarded with from the liberals and the media. They would never go along with full-fledged socialism, but they will agree to compromise on one small issue and then the next year they will compromise on another small issue, and then they will get mad at people making more money than them because they is what the media tells them is going on, and then, over time, all the small compromises will add up and we will have socialism without anyone even knowing, or believing, that we have become socialist.

The Bible Sets the Example that We Should Follow

America is great because of the Christian principles it was founded on. As America slowly abandons those principles, America will see more problems.

One good story that the Bible tells us is the story of a man in who agreed to do a job for a landowner for one denarius but then complained about his pay compared to another man’s pay. The Bible (Matthew 20:1-26) says that the landowner answered and said, “Friend, I am doing you no wrong. Did you not agree with me for a denarius? Take what is yours and go your way.” I guess the NBA Players Union did not read that portion of the Bible when they decided to protest their multi-million dollar a year salaries….

The Bible also says we should take care of those in need. I agree with that completely. Conservatives are not greedy and are not against helping people in need. In fact, conservatives tend to give more of their money to charitable organizations than liberals. We just believe that our churches can do more to help the needy with the money we give it than the government can. I also believe that it perception of what we “need” has been distorted. People need food and shelter. People do not need big screen televisions, steaks and fancy cars just because your neighbor has those things. We should be content with what we have instead of coveting what others have. The great thing about America though is that if you want those fancy things, it IS possible for you to attain them, because we are a capitalistic society and not a socialistic society.

-- Although liberal families' incomes average 6 percent higher than those of conservative families, conservative-headed households give, on average, 30 percent more to charity than the average liberal-headed household ($1,600 per year vs. $1,227).

-- Conservatives also donate more time and give more blood.

-- Residents of the states that voted for John Kerry in 2004 gave smaller percentages of their incomes to charity than did residents of states that voted for George Bush.

-- Bush carried 24 of the 25 states where charitable giving was above average.

-- In the 10 reddest states, in which Bush got more than 60 percent majorities, the average percentage of personal income donated to charity was 3.5. Residents of the bluest states, which gave Bush less than 40 percent, donated just 1.9 percent.

-- People who reject the idea that "government has a responsibility to reduce income inequality" give an average of four times more than people who accept that proposition.